The Daily Caveat last wrote about the Ron Perelman, Sunbeam, Morgan Stanley fiasco in early April. Perleman filed suit against Morgan Stanley, alledging that the firm aided Sunbeam in inflating sales figures prior to Perleman receiving a large quantity of Sunbeam Shares in a stock exchange. Perelman has since been awarded more than $600 million in compensatory damages by a jury and is now seeking $2 billion in punitive damages.

Via CorporateConsel.net:

Perelman Seeks $2 Billion in Punitives Against Morgan Stanley

Jill Barton
The Associated Press
05-18-2005

A jury that awarded billionaire financier Ron Perelman $604.3 million in compensatory damages is preparing to mull his request for another $2 billion in punitive damages from Morgan Stanley, which he accused of deceiving him about Sunbeam Corp.'s financial condition.
The investment firm plans to appeal the verdict, which was delivered Monday, and called any punitive damages "inappropriate and legally deficient."

The jury said it found clear and convincing evidence that Perelman, the Revlon cosmetics chief, relied on false statements that Sunbeam was a turnaround success and could afford to acquire his camping equipment company, Coleman.

Sunbeam filed for bankruptcy protection in 2001 after its financial troubles were discovered, and Perelman alleged he had millions in losses because stock he received in the deal plunged in value. His lawsuit is also seeking $2 billion in punitive damages, which the jury will consider over the next few days....

Morgan Stanley vowed to appeal the verdict, blaming Judge Elizabeth Maass for issuing a default judgment in which she told the jury that Morgan Stanley helped Sunbeam, an investment banking client, defraud investors. Because of that judgment, Perelman only had to prove that he was swayed into making his decisions regarding the Coleman sale by Morgan Stanley's advice.

"Far from being part of the Sunbeam fraud, Morgan Stanley was a victim of that fraud, losing $300 million when Sunbeam collapsed, one of the many true facts that the jury was not allowed to hear," Morgan Stanley said in a statement.

Before the start of the trial, Perelman won a ruling by the judge that said jurors must accept as fact that Morgan Stanley helped Sunbeam cover up its failing finances. That meant Perelman only had to show that he relied on the Wall Street firm's advice when he accepted 14.1 million shares of Sunbeam stock in the 1998 buyout deal.

"The verdict, while disappointing, is not surprising, given the unprecedented and highly prejudicial rulings imposed by the trial judge," Morgan Stanley said. "Morgan Stanley was not permitted to defend itself on the merits. As a result, the jury heard allegations, instead of true facts, and Morgan Stanley was denied a fair trial."...

More to be found here, in the original piece.

And on a side note, Morgan Stanley is facing an independent investigation from the SEC regarding whether the firm failed to provide emails about the Sunbeam transactions from Perelman's legal team. Securities Litigation Watch as the full rundown on that story, drawing from a recent WSJ article. Their summary can be found here.

Labels: Morgan Stanley